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Hong Kong SAR, China

Foreign Direct Investment

Global foreign direct investment (FDI) flows in the first half of 2021 reached an estimated USD 852 billion, showing stronger than expected rebound momentum, with an increase of 78% of the partial-year growth rate on the previous year according to UNCTAD’s Investment Trends Monitor released on October 2021. The global FDI outlook for the full year 2021 has also improved from earlier projections. The current momentum and the growth of international project finance are likely to bring FDI flows back beyond pre-pandemic levels. Nevertheless, the duration of the health crisis and the pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risk factors, including labour and supply chain bottlenecks, energy prices and inflationary pressures, will also affect final year results. (UNCTAD, October 2021). Covid’s impact on developing markets and shifting investment from China are major trends that will impact foreign investment in 2022.

According to the 2021 World Investment Report released by UNCTAD, Hong Kong received USD 119 billion of FDI in 2020, almost 62% more than in 2019 (USD 74 billion), driven mainly by an increase in intracompany loans and reinvested earnings. While representing a small share of FDI, the rebound in cross-border M&A sales to USD 11 billion (from - USD 1 billion in 2019) also contributed to this increase, thanks to many cases of Chinese MNEs consolidating affiliates in Hong Kong. Given the economy's sizeable intra-company flows and its close ties with China, which contributes 28% of its FDI stock, the rise in FDI in Hong Kong reflects corporate restructuring, particularly by Chinese multinationals, rather than new investment. It ranks third in terms of FDI inflows after the US and China in 2020. It is also the fourth largest country in terms of FDI outflows, registering USD 102 billion in 2020. The stock of FDI reached USD 1 884 billion in 2020. Hong Kong is a hub for foreign MNEs' regional headquarters, inflows were mostly invested in services sector operations (including regional headquarters and finance functions that facilitate indirect FDI flows). The main investing countries are China, the British Virgin Islands, the United Kingdom, Bermuda and Japan. The vast majority (around three-quarters) of investments are intended for financial activities: holding, real estate, finance, insurance, banking, etc.

Hong Kong is attractive due to several strong factors: its strategic position (it is a gateway to the Chinese market), its status as a free port; its simple tax system that provides many incentives, good infrastructure and judicial security. According to the last Doing Business 2020 ranking issued by the World Bank, Hong Kong ranks 3rd out of 190 countries in business climate, rising one spot compared to last year. Hong Kong has one of the world’s best regulatory systems for paying taxes. In 2019, Hong Kong made dealing with construction permits easier by enhancing its risk-based approach to inspections.

The latest United Nation Asia-Pacific Trade and Investment Trends Report provides additional information on FDI in Hong Kong and Asia-Pacific in 2021 and 2022.

Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 73,714134,710140,696
FDI Stock (million USD) 1,867,6971,851,4642,022,195
Number of Greenfield Investments* 19588100
Value of Greenfield Investments (million USD) 4,3732,2283,828

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Hong Kong SAR, China East Asia & Pacific United States Germany
Index of Transaction Transparency* 10.0 5.9 7.0 5.0
Index of Manager’s Responsibility** 8.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 9.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.


What to consider if you invest in Hong Kong SAR, China

Strong Points

Hong Kong is an international leader in terms of international trade, a services centre with high added value and the bridgehead to one of the largest production bases in the world, China. Hong Kong has a sound economy and a stable and efficient financial and banking system. Key strong points for FDI in Hong Kong include:

  • Favourable tax measures
  • The transparency of local institutions 
  • Freedom of information 
  • Availability of qualified human resources  
  • Its advantageous geographical location in Asia
Weak Points

Disadvantages for FDI in Hong-Kong include:

  • High cost of property and work space (offices, shops, etc.)
  • High cost of salaries, compared to other Asian countries such as Mainland China and India
  • The excessive importance of the financial sector in national economy
Government Measures to Motivate or Restrict FDI
Hong Kong is a free territory for investments, which are in fact encouraged by the government with a favourable taxation policy and light legislation. Foreign companies can be set up freely, register their brands and the director of the company doesn't have to be a citizen nor a resident of Hong Kong. The government has also put in place numerous initiatives to support business innovation.


Investment Opportunities

The Key Sectors of the National Economy
The service sector has a very significant role in the economy of Hong Kong (89% of GDP).
Business services, retail, information and communication technologies, electronics and biotechnology, tourism and transportation are sectors that, in addition to being already highly established, have strong potential.
High Potential Sectors
In order to pursue economic development towards greater diversification, the government has set priorities for development: medicine (assistance to the disabled and the elderly), education, environmental technologies, tourism and innovative services are thus sectors with strong development potential.
Privatization Programmes
Private companies already operate all major utilities in Hong Kong under an agreement framework with the local government, except for water.
Tenders, Projects and Public Procurement
HK Government, Trace E-Gov
Tenders Info, Tenders in Hong Kong
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
There are only two electricity suppliers: Hongkong Electric and China Light and Power; while Towngas is the country’s only gas supplier.
Sectors in Decline
Hong Kong is an economy based on services, thus the manufacturing sector's contribution to GDP has always been modest and has been decreasing in recent years.
The tourism sector has been suffering in 2019 due to sustained political protests, and the situation worsened in 2020 and 2021 amid the COVID-19 pandemic.